SWOT Analysis / TOWS Matrix for Itochu Corp. (Japan)
Based on various researches at Oak Spring University , Itochu Corp. is operating in a macro-environment that has been destablized by – there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing energy prices, increasing household debt because of falling income levels, increasing transportation and logistics costs,
increasing government debt because of Covid-19 spendings, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Itochu Corp. can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Itochu Corp., and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Itochu Corp. operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Itochu Corp. can be done for the following purposes –
1. Strategic planning of Itochu Corp.
2. Improving business portfolio management of Itochu Corp.
3. Assessing feasibility of the new initiative in Japan
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Itochu Corp.
Strengths of Itochu Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Itochu Corp. are -
Organizational Resilience of Itochu Corp.
– The covid-19 pandemic has put organizational resilience at the centre of everthing Itochu Corp. does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Chemical Manufacturing industry
– Itochu Corp. has clearly differentiated products in the market place. This has enabled Itochu Corp. to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped Itochu Corp. to invest into research and development (R&D) and innovation.
High brand equity
– Itochu Corp. has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Itochu Corp. to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Itochu Corp. has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Itochu Corp. staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Itochu Corp. is one of the leading players in the Chemical Manufacturing industry in Japan. It is in a position to attract the best talent available in Japan. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Chemical Manufacturing
– Itochu Corp. is one of the leading players in the Chemical Manufacturing industry in Japan. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Japan but also across the existing markets. The ability to lead change has enabled Itochu Corp. in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Itochu Corp. has one of the best training and development program in Basic Materials industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management in the Chemical Manufacturing industry
– Itochu Corp. is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Itochu Corp. comprises – understanding the underlying the factors in the Chemical Manufacturing industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Digital Transformation in Chemical Manufacturing industry
- digital transformation varies from industry to industry. For Itochu Corp. digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Itochu Corp. has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Itochu Corp. is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Itochu Corp. is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Itochu Corp. emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Itochu Corp. has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses of Itochu Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Itochu Corp. are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Itochu Corp. supply chain. Even after few cautionary changes, Itochu Corp. is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Itochu Corp. vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Itochu Corp., in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. Itochu Corp. has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Itochu Corp. is one of the leading players in the Chemical Manufacturing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemical Manufacturing industry in last five years.
Need for greater diversity
– Itochu Corp. has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Itochu Corp. is slow explore the new channels of communication. These new channels of communication can help Itochu Corp. to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Itochu Corp. is dominated by functional specialists. It is not different from other players in the Chemical Manufacturing industry, but Itochu Corp. needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Itochu Corp. to focus more on services in the Chemical Manufacturing industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Japan, Itochu Corp. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in Chemical Manufacturing industry
– The stress on hiring functional specialists at Itochu Corp. has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee of Itochu Corp. is just above the Chemical Manufacturing industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Itochu Corp. has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, Itochu Corp. has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Itochu Corp. lucrative customers.
Itochu Corp. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Itochu Corp. are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Itochu Corp. to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Itochu Corp. to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Itochu Corp. has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Itochu Corp. can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Itochu Corp. to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Itochu Corp. can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Itochu Corp. is facing challenges because of the dominance of functional experts in the organization. Itochu Corp. can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Itochu Corp. can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Itochu Corp. can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Itochu Corp. can use these opportunities to build new business models that can help the communities that Itochu Corp. operates in. Secondly it can use opportunities from government spending in Chemical Manufacturing sector.
Buying journey improvements
– Itochu Corp. can improve the customer journey of consumers in the Chemical Manufacturing industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Itochu Corp. in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Itochu Corp. can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Chemical Manufacturing industry.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Itochu Corp. to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Itochu Corp. can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Chemical Manufacturing industry, but it has also influenced the consumer preferences. Itochu Corp. can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Itochu Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Itochu Corp. are -
Shortening product life cycle
– it is one of the major threat that Itochu Corp. is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Itochu Corp. needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Itochu Corp. can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Itochu Corp. business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Itochu Corp. has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Itochu Corp. needs to keep up with the evolution of technology in the Chemical Manufacturing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Itochu Corp. will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Itochu Corp. can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Itochu Corp. prominent markets.
Regulatory challenges
– Itochu Corp. needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Chemical Manufacturing industry regulations.
Increasing wage structure of Itochu Corp.
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Itochu Corp..
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Itochu Corp. in the Chemical Manufacturing sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Itochu Corp. high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Itochu Corp. needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Itochu Corp. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Itochu Corp. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Itochu Corp. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Itochu Corp. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Itochu Corp. to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Itochu Corp. needs to make to build a sustainable competitive advantage.